ATO, Investments

ATO probe no cause for alarm

SMSF investment diversification

Trustees should not rush to change their SMSF investment strategies ahead of the ATO’s probe into the diversification requirements of nearly 18,000 funds.

Trustees should not be alarmed by the ATO’s expected inquiry into almost 18,000 SMSFs to ensure fund investment diversification requirements are being met, according to an SMSF expert.

In a blog post on the SMSF Alliance website, practice principal David Busoli said trustees should not rush to make changes to their investment strategies following the ATO’s recent announcement.

“The emphasis is on funds that have over 90 per cent of their fund investments in a single asset – generally real property,” Busoli said.

“Undoubtedly some such trustees will believe they have committed an offence and will consider selling down the asset to create greater diversification for fear of incurring the ATO’s wrath. This would be a mistake.”

He pointed out the diversification requirements under superannuation regulations specify diversification must be considered, but do not say it must be achieved.

“If it has been properly considered, and its absence justified, the rules are satisfied,” he added.

“The problem with some investment strategies is that they are little more than a regurgitation of the requirements, a statement that they have been considered and an asset allocation that is meaningless, such as 0 per cent to 100 per cent in any asset.

“For years now I have been saying that it was just a matter of time before the ATO would be checking to see if investment strategy documents were reasonable.”

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